ITEM 5: FEES AND COMPENSATION
A. Advisory Fees and Compensation
The fees applicable to each Kinetic Client are set forth in detail in its governing documents. A
brief summary of such fees is provided below.
Kinetic Partners Fund
Management Fee
The Kinetic Partners Fund will pay Kinetic a fee for its services (the ”Management Fee”) for each
quarter equal to the result of the applicable management fee rate multiplied by the balance of each
investor’s capital account (before taking into account the estimated accrued Incentive Allocation,
if any). For purposes of calculating the Management Fee, “private investments” are valued at the
lower of (i) initial cost (as adjusted), and (ii) fair value (which may be cost). The Management Fee
is calculated and paid in advance within 15 days of the first day of each quarter, but will be
amortized monthly over the quarter.
The specific rates, calculation methodology and other terms of the Management Fee applicable to
each class are detailed in the Kinetic Partners Fund’s governing documents.
In the sole discretion of Kinetic, the Management Fee may be waived, reduced or calculated
differently with respect to a capital account of any investor. The capital accounts of the General
Partner and the capital accounts of Kinetic internal investors are not subject to the Management
Fee.
Incentive Allocation
Generally, at the end of each fiscal year, the General Partner is entitled to an incentive allocation
(the “Incentive Allocation”) from the Kinetic Partners Fund, which is determined separately with
respect to each capital account established for an investor.
The Kinetic Partners Fund offers several classes of interests into which investors may invest, and
the rate and manner of calculation of the Incentive Allocation applicable to each investor is
determined by the terms of such classes of interests. The specific Incentive Allocation amounts
charged to investors will also vary due to a number of factors including, without limitation,
restrictions from participating in new issues, timing of capital contributions and withdrawals, and
the application different private investment limits.
For certain classes of interests, the Incentive Allocation will be an amount equal to the result of (i)
the applicable Incentive Allocation rate multiplied by (ii) the amount of the net capital appreciation
allocated to an investor’s capital account for such fiscal year, taking into account any gains or
losses from realized or deemed realized “private investments” and any “private investment
income”, but reduced by the Management Fee debited to such capital account for such fiscal year
and any balance in such capital account’s “loss recovery account”. Certain other classes of interests
will be subject to a “dynamic incentive allocation”, pursuant to which the Incentive Allocation rate
applicable to an investor’s capital account will increase based on the rate of return of such capital
account for such fiscal year.
The specific rates and calculation methodology for the Incentive Allocation applicable to each
class are detailed in the Kinetic Partners Fund’s governing documents.
In the sole discretion of the General Partner, the Incentive Allocation may be waived, reduced or
calculated differently with respect to the capital accounts of any investor. The capital accounts of
the General Partner and the capital accounts of internal Kinetic investors will not be subject to the
Incentive Allocation.
Other Clients
Fees and incentive compensation applicable to other Kinetic Clients, including the Co-Investment
Funds, are subject to negotiation and established pursuant to the client’s governing documents.
B. Payment of Fees
Fees and compensation paid to Kinetic or its affiliates by Kinetic Clients are generally deducted
from the assets of such clients. As discussed above, Management Fees are generally deducted on
a quarterly basis and the Incentive Allocation is generally deducted on an annual basis. Fees and
compensation for other Kinetic Clients, including the Co-Investment Funds, may be paid at
different times, including upon the realization of the investments held by the client.
C. Additional Fees and Expenses
In addition to the management fees and incentive compensation items noted above, investors will
directly or indirectly bear their operating expenses as more fully described in each Kinetic Client’s
governing documents. These expenses may include, without limitation, some or all of the
following: (i) expenses related to the research, sourcing, due diligence, appraisal, monitoring and
disposition of actual and prospective investments, whether or not such investment is consummated,
including expenses related to obtaining research and market data (including expenses related to
obtaining, processing and analyzing “big data” or “alternative data”); expenses related to
performing due diligence on current or prospective vendors of any of such research or market data
services; consultant fees; travel expenses (including transportation, lodging and meals);
conference registration fees; third-party investment sourcing fees (including performance-based
fees); expenses of proxy research and voting services; expenses of class action claim monitoring
and filing services; (ii) expenses related to brokerage, custody and banking of the Kinetic Client,
including brokerage, prime brokerage and futures commission merchant commissions and
expenses (including commissions and expenses of any outsourced trading desk); expenses of any
soft dollar aggregator; expenses relating to block trades; expenses relating to short sales; clearing
and settlement charges (including reconciliation services); custodial expenses; and bank service
fees; (iii) expenses related to financings or refinancings, including interest expenses and any costs
and expenses of a private investment leverage facility or borrowings thereunder; (iv) the Kinetic
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